Inflation

Hey folks!
I’m ASHIM P.
1960 2021
INFLATION
Overview
1. Introduction to 2. Why inflation
inflation. occur?
3. Different price 5. Calculation of

4.Calculation of cpi
index. inflation
In 1960
For 60 years
In 2021
1960 2021
INFLATION
$100
In 2021
$1
In 1960
Inflation is the rate of
increase in prices over a given
period of time.
Why does this inflation occurs?
Demand pull Inflation

Cost push Inflation

60 years
Rate = ?
In 1960
In 2021
Price index
1.Producer price index (PPI)
2.Wholesale price index (WPI)
3.Consumer price index (CPI)
Producer price index (PPI)
Change in price from the

prospective
Of seller of the goods is
producer Price index (PPI)
Wholesale price index (WPI)
Change in price of goods in the

Stage before the retail level is
Wholesale Price index (WPI)
Consumer price index (CPI)
Change in price of goods in the

Prospective of consumer is
consumer Price index (CPI)
consumer price index (CPI)
The consumer price index (CPI) is a measure

of the overall cost of the goods and services
bought by a typical consumer.
Each month, the Bureau of Labor Statistics(BLS), which is

Part of the Department of Labor, computes and reports
the consumer price index
How the Consumer Price Index Is Calculated?
1. Fix the basket.

How the Consumer Price Index Is Calculated ?
1. Fix the basket.

2. Finds the price.
How the Consumer Price Index Is Calculate?
1. Fix the basket.

2. Finds the price.
3. Compute the basket’s cost.
1. Fix the basket.

2. Finds the price.
4. Choose a base year and compute the index.
1. Fix the basket.

2. Finds the price.
4. Choose a base year and compute the index.
5. Compute the inflation rate.

Rate of inflation
Inflation =
Inflation =
Rate of inflation
Inflation =
GDP Deflator
GDP deflator=
1. Calculate rate of inflation
Rate of inflation =
GDP deflator for 2011-12 = 275.6
GDP Deflator for 2012-13 = 300.7 = 300.7 – 275.6

PIN = Price Index Number
PIN in 2010-11 = 210.6
Rate of inflation =
PIN in 2011-12 = 216.8
CPI of 2012 = 9.25 Rate of inflation =

CPI of 2013 = 11.25

CPI for
1st Year : 380
2nd Year : 385 Rate of inflation =
3rd Year : 391
4th year : 398
5. Calculate GNP Deflator and rate of inflation
Nominal GNP of 2011-12 = 30 Crore
Real GNP of 2011-12 = 25 Crore

GNP Deflator in 2007 = 100.50
GNP Deflator in 2008 = 105.50
7. Calculate rate of inflation and GNP Deflator GNP Deflator = CPI

Year N. GNP Real GNP CPI GNP D. GDP deflator=
2010-11 4414 13759 128 ?
2011-12 Rate of inflation =
5158 14535 151 ?
9. Calculate Real GDP, GNP Deflator and rate of inflation
Year Nominal GNP Wholesale PIN Real GNP

Base Year = 2005 (2005/06 = 100)
2010-11 65,285 345.5 ?
2011-12 72,695 375.0 ?
GNP Deflator = CPI = Wholesale PIN
Wholesale PIN =
Rate of Inflation =
Year Nominal GNP Real GNP GNP Deflator (%)
2006 6,537.7 ? 101.05
2007 7,024.2 ? 103.04
GNP Deflator =
2008 7,766.1 ? 105.03
2009 8,465.3 ? 108.02
2010 9,267.0 ? 110.01 Rate of inflation =
1. Calculate real GNP of each year.
2. Interpret What GNP deflator of 110.10 Base year = 2005 = 100%

For the year 2010.
3. Determine whether or not inflation occur over

the 2006-2010.
Rate of inflation
Inflation =
GDP Deflator
GDP deflator=
GDP VS CPI
Usually, these two statistics tell a similar story. Yet this
differences can cause them to diverge.
Mercedes-Benz raises the price of its cars. Because Mercedes are made in German, the
car is not part of Nepal GDP. But Nepali consumers buy Mercedes, so the car is part of the
typical consumer’s basket of goods. Hence, a price increase in an imported consumption good,
such as a Mercedes, shows up in the consumer price index but not in the GDP deflator.
suppose that the price of an Tea produced by Nepal and sold to the German or any other
country rises. Even though the tea is part of GDP, it is not part of the basket of goods and
services bought by a typical consumer. Thus, the price increase shows up in the GDP deflator
but
not in the consumer price index.
GDP VS CPI
Year P(x) Q(x) P(y) Q(y)
2010 5 500 10 250
2011 10 1,000 20 500
2012 15 1,500 30 750
2013 20 2,000 40 1,000
Calculate Nominal GDP, Real GDP, GDP Deflator and rate of inflation during
2010-2013
Nominal GDP for 2013 = (20*2000) + (40*1000)
Real GDP for 2013 = (5*2000) + (10*1000)

GDP Deflator =
Rate of inflation =

Inflation

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Hey folks!

3. Different price 5. Calculation of

Demand pull Inflation

Cost push Inflation

Change in price from the

Change in price of goods in the

Change in price of goods in the

The consumer price index (CPI) is a measure

Each month, the Bureau of Labor Statistics(BLS), which is

1. Fix the basket.

1. Fix the basket.

1. Fix the basket.

1. Fix the basket.

1. Fix the basket.

5. Compute the inflation rate.

2. Calculate rate of inflation

CPI of 2012 = 9.25 Rate of inflation =

4. Calculate rate of inflation

6. Calculate rate of inflation

7. Calculate rate of inflation and GNP Deflator GNP Deflator = CPI

Year Nominal GNP Wholesale PIN Real GNP

GNP Deflator = CPI = Wholesale PIN

1. Calculate real GNP of each year.

2. Interpret What GNP deflator of 110.10 Base year = 2005 = 100%

3. Determine whether or not inflation occur over

Nominal GDP for 2013 = (20*2000) + (40*1000)

Real GDP for 2013 = (5*2000) + (10*1000)

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Nominal GDP for 2013 = (202000) + (401000)

Real GDP for 2013 = (52000) + (101000)